Haley Company produces one product and has the capacity to make 150,000 units per month. The cost that is associated with producing 125,000 units is shown below:

The selling price per unit is $150. The Haley company was contacted by a prospective customer interested in purchasing 25,000 units for $100. The management team is considering this offer and in the meeting about this new prospect, you (the management accountant), stated that the fixed cost will remain the same, but the variable cost will increase along with $10 shipping expense due to the customer’s international location. Management has asked you to determine if they should accept or reject the new customer proposal and what nonmonetary factors should be considered.

Financial data for Joel de Paris, Inc., for last year follow:

The company paid dividends of $207,200 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%.

Required:

1. Compute the company's average operating assets for last year.

2. Compute the company’s margin, turnover, and return on investment (ROI) for last year. (Do not round intermediate calculations and round your final answers to 2 decimal places.)

3. What was the company’s residual income last year?

match Point is a retail sports store carrying tennis apparel and equipment. The store is at the end of its second year of operation and is struggling. A major problem is that its cost of inventory has continually increased in the past two years. In the first year of operations, the store assigned inventory costs using LIFO. A loan agreement the store has with its bank, its prime source of financing, requires the store to maintain a certain profit margin and current ratio. The store's owner is currently looking over Match Point’s preliminary financial statements for its second year. The numbers are not favorable. The only way the store can meet the required financial ratios agreed on with the bank is to change from LIFO to FIFO. The store originally decided on LIFO because of its tax advantages. The owner recalculates ending inventory using FIFO and submits those numbers and statements to the loan officer at the bank for the required bank review. The owner thankfully reflects on the available latitude in choosing the inventory costing method.

Required:

1. How does Match Point’s use of FIFO improve its net profit margin and current ratio?
2. Is the action by Match Point’s owner ethical? Please justify your answer with an explanation.

Presented here are a statement of Income and Retained Earnings and Comparative Balance Sheets for Madison's garden PTY LTD, which operates a National chain of sporting goods stores.

Statement of Income and Retained Earnings for the Year ended 31 December 2016

Required:

1. Prepare a statement of cash flows for Madison's gardens PTY LTD for the year ended 31,2016, using indirect Method in the Operating Activities section of the statement. (15)

2. Madison Gardens (PTY) LTD 's management is concerned with its short term liquidity and its solvency over the long run. To help management evaluate these, compute the following ratios, rounding all answers to the nearest one-tenth of a percent:

a. Current Ratio

b. Acid-Test Ratio

c. Cash flow from operations to current liabilities Ratio

d. Accounts Receivable turnover ratio

e. Number of days sales in receivable

f. Inventory turn over Ratio

g. Number of days sales in inventory

h. Debt-to-Equity Ratio

i. Debt service coverage Ratio

j.Cash flow from operations to capital expenditures ratio

3. Comment on Madison Garden's liquidity and its insolvency. What additional information do you need to fully evaluate the company?

(8) In case Exhibit 9, Panel A, the company provides a reconciliation of the $5.66 EPS figure to the income statement’s reported EPS figure of $8.78. Also referred to as “Core EPS” in a PepsiCo-related press release, this figure, $5.66, is a non-GAAP financial measure many companies choose to report. What does a non-GAAP financial measure mean? What does the terminology “core” suggest to you? What is the reason that many companies provide non-GAAP financial information in their financial reports?

Church Company completes these transactions and events during March of the current year (terms for all its credit sales are 2/10, n/30). Mar. 1 Purchased $43,600 of merchandise from Van Industries, invoice dated March 1, terms 2/15, n/30. Mar. 2 Sold merchandise on credit to Min Cho, Invoice No. 854, for $16,800 (cost is $8,400). Mar. 3 Purchased $1,230 of office supplies on credit from Gabel Company, invoice dated March 3, terms n/10 EOM. Mar. 3 Sold merchandise on credit to Linda Witt, Invoice No. 855, for $10,200 (cost is $5,800). Mar. 6 Borrowed $82,000 cash from Federal Bank by signing a long-term note payable. Mar. 9 Purchased $21,850 of office equipment on credit from Spell Supply, invoice dated March 9, terms n/10 EOM. Mar. 10 Sold merchandise on credit to Jovita Albany, Invoice No. 856, for $5,600 (cost is $2,900). Mar. 12 Received payment from Min Cho for the March 2 sale less the discount. Mar. 13 Sent Van Industries Check No. 416 in payment of the March 1 invoice less the discount. Mar. 13 Received payment from Linda Witt for the March 3 sale less the discount. Mar. 14 Purchased $32,625 of merchandise from the CD Company, invoice dated March 13, terms 2/10, n/30. Mar. 15 Issued Check No. 417, payable to Payroll, in payment of sales salaries expense for the first half of the month, $18,300. Cashed the check and paid the employees. Mar. 15 Cash sales for the first half of the month are $34,680 (cost is $20,210). (Cash sales are recorded daily, but are recorded only twice here to reduce repetitive entries.) Mar. 16 Purchased $1,770 of store supplies on credit from Gabel Company, invoice dated March 16, terms n/10 EOM. Mar. 17 Received a $2,425 credit memorandum from CD Company for the return of unsatisfactory merchandise purchased on March 14. Mar. 19 Received a $630 credit memorandum from Spell Supply for office equipment received on March 9 and returned for credit. Mar. 20 Received payment from Jovita Albany for the sale of March 10 less the discount. Mar. 23 Issued Check No. 418 to CD Company in payment of the invoice of March 13 less the March 17 return and the discount. Mar. 27 Sold merchandise on credit to Jovita Albany, Invoice No. 857, for $14,910 (cost is $7,220). Mar. 28 Sold merchandise on credit to Linda Witt, Invoice No. 858, for $4,315 (cost is $3,280). Mar. 31 Issued Check No. 419, payable to Payroll, in payment of sales salaries expense for the last half of the month, $18,300. Cashed the check and paid the employees. Mar. 31 Cash sales for the last half of the month are $30,180 (cost is $16,820). - GENERAL JOURNAL

Absorption and Variable Costing Income Statements for Two Months and Analysis

During the first month of operations ended July 31, Head Gear Inc. manufactured 28,200 hats, of which 26,200 were sold. Operating data for the month are summarized as follows:

During August, Head Gear Inc. manufactured 24,200 hats and sold 26,200 hats. Operating data for August are summarized as follows:

Required:

1a. Prepare income statement for July using the absorption costing concept.

1b. Prepare income statement for August using the absorption costing concept.

Revenue and cash receipts journals; accounts receivable subsidiary and general ledgers

Transactions related to revenue and cash receipts completed by Crowne Business Services Co. during the period April 2–30 are as follows:

Required:

1. Insert the following balances in the general ledger as of April 1:

After completing the recording of the transactions in the journals in part 3, total each of the columns of the special journals, and post the individual entries and totals to the general ledger. Insert account balances after the last posting. When posting to the general ledger, post in chronological order. However, if there is more than one entry on the same date, be sure to post transactions from the revenue journal before posting transactions from the cash receipts journal.

If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

2. Insert the following balances in the accounts receivable subsidiary ledger as of April 1:

After completing the recording of the transactions in the journals in part 3, post to the accounts receivable subsidiary ledger in chronological order, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer's account before recording a cash receipt. If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

3. Prepare a single-column revenue journal (p. 40) and a cash receipts journal (p. 36). Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. The Fees Earned column is used to record cash fees.

4. Using the two special journals and the two-column general journal (p. 1), journalize the transactions for April. Post to the accounts receivable subsidiary ledger, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer’s account before recording a cash receipt.

5. Total each of the columns of the special journals and post the individual entries and totals to the general ledger. Insert account balances after the last posting.

If an amount box does not require an entry, leave it blank.

6. What is the sum of the customer balances?
$

Does the sum of the customer balances agree with the accounts receivable controlling account in the general ledger?
   

7. Would an automated system omit postings to a controlling account as performed in step 5 for Accounts Receivable?

Our accounting firm has won the engagement to be the new federal income tax consultant for a fortune 500 company. In the course of preparing the federal income tax returns for its tax year ending December 31, 2017, we reviewed the company's federal income tax returns for recent years. Our review discovered a large error in the company's computation of its domestic production activities deduction. The error is the result of misunderstanding the law, and was repeated on all of the recent returns. We have discussed the matter briefly and informally with the client, who has indicated that they would rather not file amended returns correcting the error. The client has also indicated that it would like a written analysis of the issue, including the chances of the issue being found by the IRS on audit and of the client prevailing on the matter if it winds up in court. To prepare for the next meeting with the client on this matter, we need to determine:

• Under the IRS rules applicable to tax practitioners, what are our ethical obligations to the client and to the IRS with regard to these mistakes, the analysis requested by the client and our advice to the client?
• Under the AICPA's standards, what are our ethical obligations to the client and to the IRS with regard to these mistakes, the analysis requested by the client and our advice to the client?

According to the judge, in the Fund of Funds case, Arthur Andersen could have chosen to resign from the Fund of Funds engagement when it discovered the excessive prices being charged the mutual fund by King Resource. Arthur Andersen contended that resigning that point would not have benefited Fund of Funds. Do you agree? why or why not?

The contribution format income statement for Huerra Company for last year is given below:

The company had average operating assets of $495,000 during the year.

Required:

1. Compute the company’s return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover.

For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI figure. Consider each question separately, starting in each case from the data used to compute the original ROI in (1) above.

2. Using Lean Production, the company is able to reduce the average level of inventory by $104,000. (The released funds are used to pay off short-term creditors.)

3. The company achieves a cost savings of $6,000 per year by using less costly materials.

4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $126,000. Interest on the bonds is $13,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7,000 per year.

5. As a result of a more intense effort by sales people, sales are increased by 25%; operating assets remain unchanged.

6. At the beginning of the year, obsolete inventory carried on the books at a cost of $19,000 is scrapped and written off as a loss.

7. At the beginning of the year, the company uses $184,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock.

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Question: 1. Windham Corporation has current assets of $500,000 and current liabilities of $625,000. Windha...

1. Windham Corporation has current assets of $500,000 and current liabilities of $625,000. Windham Corporation's current ratio would be increased by:

2. During the year just ended, the retailer James Corporation purchased $433,000 of inventory. The inventory balance at the beginning of the year was $184,000. If the cost of goods sold for the year was $457,000, then the inventory turnover for the year was:

3. Deflorio Corporation’s inventory at the end of Year 2 was $167,000 and its inventory at the end of Year 1 was $152,000. The company’s total assets at the end of Year 2 were $1,471,000 and its total assets at the end of Year 1 were $1,420,000. Sales amounted to $1,450,000 in Year 2. The company’s total asset turnover for Year 2 is closest to:

4. Mayfield Corporation has provided the following financial data:

5. Freiman Corporation's most recent balance sheet and income statement appear below:

6.

Deacon Corporation has provided the following financial data from its balance sheet and income statement:

The company’s times interest earned ratio for Year 2 is closest to:

Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $222,664.

There is no expected residual value.

Required:
Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)

Record the entry at the inception of the lease

Record the entry for annual payment receipt

Record the entry for interest revenue